Inherent Power of The Court to Enforce Substantive Family Law Orders Confirmed

In Fan & Lok [2015] FamCA 816 (1 October 2015) Rees J heard an application by the deceased wife’s executor to enforce a Binding Financial Agreement (“BFA”) against the husband. The BFA provided that upon the death or separation of the wife, the husband was to sell Property F in order to discharge the loan for Property E, so that the wife shall receive Property E unencumbered. The proceeds of the sale of Property F were, however, not sufficient to extinguish the debt and as such, the wife’s estate applied for an order for the sale of Property C, which was to be retained by the husband pursuant to the BFA.

Section 90KA of the Family Law Act 1975 (Cth) (the “Act”) states that in  relation to whether a financial agreement is valid and enforceable, principles of law and equity are to applied by the court. As such, the court has:

  • the power to grant remedies as if the BFA is a contract or purported contract;
  • the power to make an order for the payment of interest at a rate prescribed in the BFA; and
  • in addition to, or instead of, making such orders, may order that the agreement be enforced as if it were an order of the court.

Under section 80(1)(c) of the Act, it also provides that the Court may ‘order that payment of any sum ordered to “be paid be wholly or partly secured in such manner as the court directs”. This includes the power to order the realisation of the property against which the order is secured (Molier & Van Wyk (1980) FLC 90-911). However, section 80 in itself is not to be used alone as a source of power for orders requiring sale of real property. Instead, the Court dismissed the appeal and held that the trial judge validly made the order of sale because there was an inherent power of the court to make the original order effective in accordance with the substance and intention of the order.

It was held in Kaljo that an application could be made to the Court for further orders for the implementation of the substantive order if it is necessary to give effect to the order to cover unforeseen circumstances. It is capable of extension to cover further orders necessary to give effect to the clear intention of the original order where that order has failed to cover certain eventualities, including the failure to comply with an order for the settlement of a lump sum within the time prescribed.

In the present case, Rees J stated that the Court may order the sale of Property C in the event that the husband fails to comply with his obligation to pay the amount owing by him in relation to Property E. Furthermore, even if Rees J was wrong, the Court has the inherent power to impose consequential provisions for the sale of Property C to ensure that the orders made requiring the husband to discharge the loan to HSBC came into effect.

Additionally, Rule 20.05(a) of the Family Law Rules 2004 (Cth) expressly states that the Court may make an enforcement order, in relation to an obligation to pay money, for the seizure and sale of real property.

As such, Orders were made to facilitate the sale of Property C and the application of the sale proceeds to the HSBC loan if the husband is otherwise unable to pay the amount owing by him to HSBC pursuant to the Agreement.

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